It wasn't too long ago that virtually the only safety assurance that commercial banks gave their customers was a reminder that deposits were insured, up to $100,000, by the Federal Deposit Insurance Corp. That was before hundreds of the nation's depository institutions became entangled in a web of nonrestrictive lending policies and sour real estate loans.
Now, banks throughout the Southwest are going through various stages of a survival drill, some in the Mid-Atlantic region have been shaken to their foundations and a fair number in the Northeast are on the brink of collapse. As a result, federal regulators, spooked by the savings and loan industry disaster that laissez faire policies and supervision helped create, are clamping down -- overreacting at times in the process.
With so many problems surfacing at historically sound institutions, it now appears that the familiar FDIC seal by itself may not be adequate as a symbol of soundness. That's at least one inference that could be drawn from recent newspaper ads promoting the strength and safety of some local banks.
"Today, the promise of a high return does not always mean you're making a wise investment," begins an ad from the three subsidiaries of Citizens Bancorp in Laurel. "... You also need to be confident that the bank you choose will be around tomorrow," the ad continues.
Elsewhere in the ad, readers are assured in big bold letters that at Citizens Bank in the District, Maryland and Virginia, "You get a strong bank."
First Virginia Bank in Falls Church weighed in with a similar ad promoting soundness. The word, "Safety" in boldface, dominates First Virginia's ad, which also promises, "You get more than a good rate."
In yet another ad, the president of tiny National Capital Bank of Washington informs depositors they may "rest assured that they are dealing with the safest, soundest commercial bank in D.C."
This "sound" approach to advertising comes in the wake of widely publicized difficulties at some area financial institutions, the more notable of those problems leading to federal takeovers at the National Bank of Washington and United Savings Bank, a thrift in Vienna.
None of the new ads mentions the problems at NBW and United Savings Bank. Clearly, however, the messages are intended to alleviate concerns that other banks might be ripe for takeover by federal authorities. It's come to that.
Banks and their advertising agencies obviously believe it's necessary to counter a psychology of fear that appears to be taking over in the wake of bad news about the local economy in general and about financial institutions in particular.
What if executives at other area banks decide to forgo the safety and soundness campaign in favor of more mundane ads touting rates on certificates of deposit? Should we infer that those banks aren't sound? That the FDIC seal isn't worth the window to which it's affixed? Certainly not.
But there is bound to be doubt in the minds of many as they continue to read about the problems at banks. Indeed, a general malaise in the real estate industry and the effects that it is having on bank earnings already have raised considerable doubt.
It's all part of a psychology that seems to be spreading with widening evidence of a slowdown in the area's economy.
Growth in metropolitan Washington's economy obviously has slowed. The decline began more than a year ago. The explosive growth period that spanned much of the 1980s simply ran out of steam, as most astute observers knew it would.
The local economy couldn't continue to create more than 100,000 jobs a year as it did in the mid-1980s. Population increases were unable to match the pace at which jobs were being created and a labor shortage developed, significantly affecting business growth plans.
In the meantime, demand for commercial space couldn't possibly keep up with the amount that was being built. Hence the office market is vastly overbuilt today, as vacancy rates range from a respectable 9 percent in the District to 19 percent in Northern Virginia. The hot new frontier in Loudoun County is buried under a 42 percent vacancy rate.
Certainly banks in the area contributed to overbuilding through unrestricted lending policies. Most are paying the price along with real estate developers who suddenly find themselves with a credit crunch.
Still, it would be assuming too much to think that all banks in the area may be hurtling down the deep hole that swallowed NBW. There are institutions with serious problems in their real estate loan portfolios, and those institutions have stated as much in recent reports. But the circumstances which led federal regulators to close NBW have less to do with bad real estate loans than with an accumulation of ills and missteps that span a decade.
NBW, Garfinckel's and Fantle's Drug Stores for most people are symptomatic of serious problems in the local economy. The demise of all three, however, is the culmination of years of mismanagement, poor judgment, greed and multiple changes in ownership.
All three companies were experiencing problems of one kind or another even as the area's economy was soaring to record heights. The current slowdown merely compounded those problems, resulting in failures.
Nonetheless, their demise continues to add to the psychology spawned by the general slowdown in the economy.
If this keeps up, we could see ads from retailers seeking to assure customers that their stores are sound and competitive enterprises.